DATE POSTED: June 7, 2023 9:26 am

What Happens to the House in a Divorce?

One of the most common questions we get from clients is, “What happens to the house in a divorce?” There is often significant concern from one or both parties related to who will keep the house or what will happen to the house in the event of a divorce. This inquiry can be especially stressful in cases involving minor children where maintaining a residence in a particular school district may be important. The two most common resolutions to the question of “What happens to the house in a divorce?” are (1) one party keeps the house and buys out the other party’s interest or (2) the house is sold.

1. One Party Keeps the House:          

In many cases, one party will want to keep the house, and the other party will agree to move out, or in some cases, the parties are already living apart before the divorce is filed. If both parties’ names are on the mortgage, then typically the party keeping the house will need to refinance the mortgage to remove the other party within an agreed-upon or allotted period. If the house is equity, then the party keeping the house will need to “buy out” the other party’s interest in the equity. An appraisal helps parties determine if their house has equity and helps guide parties to figure out their respective equitable interest in the equity in the property to determine how much each party’s equity “buyout” would be worth.  “Buying out” the other party’s equity interest can be done several different ways, the most common methods being taking out cash from some of the equity in the house at the time of the refinance, or by offsetting the other party’s interest in the equity against other assets, or a combination of both. In cases where parties own more than one piece of real estate and are each keeping a property, the equities in each property can also offset against each other as a buyout or partial buyout of each party’s interest therein. What each party’s interest in a property is can vary from case to case.

If the parties cannot agree on who will keep the house, then the court can decide which party will be awarded the house, or the court can order that the house be sold and the net proceeds from sale be divided between the parties. 

2. The House is Sold:

If neither party wants to keep the house or if neither party can afford to keep the house, then the house will be listed for sale and the parties will divide the net proceeds from the sale.

Typically, the details of how a realtor is selected, the listing price for the sale of the house, the cooperation of the parties with respect to the sale, and what happens to the net proceeds are either agreed upon by the parties, negotiated between the attorneys, or ordered by the court if the parties are unable to agree between themselves or through their attorneys. Net proceeds are typically “what’s left over” from the sale proceeds after payment of standard categories such as the mortgage, real estate taxes, realtor commissions, title fees, and other closing costs.

How the net proceeds from the sale are divided between the parties varies from case to case, for example, in some cases, each party may receive an equal share of the net proceeds, while in other cases there may be a reason why one party might receive more of the net proceeds than the other party. There are also cases where the net proceeds are used to pay off marital debts before they are divided between the parties.

There are also cases where the mortgage on the house is greater than the house’s value.  This is what is referred to as the house being “under water.” There are also cases where the sale proceeds from the house are insufficient to cover all the closing costs. In each case, there will be money due from the marital estate at closing. How the parties will pay the monies owed can be agreed upon between the parties, negotiated through their attorneys, or ordered by the court if the parties are unable to agree between themselves or through their attorneys.

For guidance figuring out which option is right for you, please contact Cooper Trachtenberg Law Group, LLC at. 847-995-8800 or mcooperlaw.com for a free 30-minute consultation.